47 F.4th 618
7th Cir.2022Background
- Julie Greenbank bought a show gelding ("Thomas") for $500,000 and purchased a Great American mortality policy (9/28/17–9/28/18) covering death or "authorized humane destruction."
- Policy defined "authorized humane destruction" as either (1) insurer express consent or (2–3) certification by a "qualified veterinarian" (appointed by insured or insurer) that immediate euthanasia is imperative.
- Thomas fell ill (Feb 2018) with pneumonia and later developed severe laminitis; several vets considered euthanasia a possibility but recommended and pursued treatment first.
- Great American retained its own veterinarians; over Greenbank’s objection a tenotomy was performed (to treat laminitis), after which Thomas recovered physically though his competitive athletic future was compromised; Thomas remains alive.
- Policy renewal was denied because Greenbank failed to give the contractually required immediate notice of illness; Great American continued to control Thomas after policy termination. Greenbank sued for breach, bad faith, conversion/theft, fraud, criminal mischief, and negligence; district court granted summary judgment for Great American and the Seventh Circuit affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Breach — mortality coverage (authorized humane destruction) | Great American unreasonably withheld consent to euthanize and instead performed a tenotomy that destroyed Thomas’s show value | No covered "authorized humane destruction": no vet certified immediate euthanasia and insurer never expressly consented; insurer acted under policy in retaining vets and treating | No breach — Thomas neither died nor was lawfully "authorized" euthanized; no vet certification or insurer obligation to consent |
| Breach — Major Medical Endorsement (MME) denial of medications | Denial of coverage for Equipoise and Marquis was irrational | Medications were unnecessary for the pneumonia treatment; plaintiff produced no evidence they were "necessary" or "reasonable and customary" | No breach — plaintiff failed to show the meds were necessary or that MME conditions were met |
| Bad faith — treatment choices and GRE nonrenewal | Insurer acted in bad faith by disregarding Greenbank’s interests and by using notice failure to deny renewal | Insurer had a rational basis: no wrongful denial of mortality coverage and denial of GRE renewal based on unmet conditions precedent (immediate notice) | No bad faith — absent wrongful denial or dishonest intent; GRE denial rational and plaintiff did not appeal damages ruling |
| Conversion/theft/statutory conversion — post-termination control of horse | Continued possession after policy termination is unlawful conversion/theft | Initial possession was lawful; plaintiff never made an unqualified demand; no evidence insurer knew possession was unauthorized (counsel even told court insurer could keep the horse) | Claims fail — no demand or evidence of knowing/intentional unauthorized control; common-law conversion requires demand (or futility), statutory conversion/theft require knowing control |
Key Cases Cited
- Martinsville Corral, Inc. v. Soc'y Ins., 910 F.3d 996 (7th Cir. 2018) (summary judgment standard)
- Erie Ins. Co. v. Hickman by Smith, 622 N.E.2d 515 (Ind. 1993) (insurance bad faith principles)
- Freidline v. Shelby Ins. Co., 774 N.E.2d 37 (Ind. 2002) (insurer acts in bad faith when denial lacks any rational, principled basis)
- HemoCleanse, Inc. v. Phil. Indem. Ins. Co., 831 N.E.2d 259 (Ind. Ct. App. 2005) (bad-faith requires wrongful denial of coverage)
- Coffel v. Perry, 452 N.E.2d 1066 (Ind. Ct. App. 1983) (conversion requires demand for return unless demand would be futile)
- Schrenker v. State, 919 N.E.2d 1188 (Ind. Ct. App. 2010) (elements of tortious conversion)
- Smeigh v. Johns Manville, Inc., 643 F.3d 554 (7th Cir. 2011) (statutory conversion does not require demand; requires evidence defendant knew possession was unauthorized)
- Kartman v. State Farm Mut. Auto. Ins. Co., 634 F.3d 883 (7th Cir. 2011) (bad faith requires evidence of a culpable state of mind)